Bail cancellation in GST fraud cases may follow where courts ignore gravity and incriminating material supporting alleged involvement.

Bail in a CGST prosecution may be cancelled where the bail court ignores material factors, proceeds on irrelevant considerations, or fails to assess the gravity of the alleged economic offence. The High Court found the bail order unsustainable because it treated the absence of a formal managerial designation as decisive, even though liability under the statutory scheme is not limited to a designated manager but extends to persons who commit or cause the prohibited acts. It also overlooked the alleged fake invoicing, wrongful input tax credit, and documentary and electronic material indicating involvement in the fraud. Bail was therefore cancelled and the grant of bail set aside.

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Issues: Whether the bail granted to the respondent in a prosecution under the Central Goods and Services Tax Act, 2017 was liable to be cancelled on the ground that the bail court ignored the gravity of the offence and the incriminating material collected during investigation.

Analysis: The cancellation application was examined on the settled principles governing interference with an order granting bail, including whether the order suffers from perversity, ignores relevant material, or reflects non-consideration of the seriousness of the accusations. The allegations concerned generation of fake and invoice-less transactions, wrongful availing of input tax credit, and the recovery of documentary and electronic material, including statements recorded during investigation, cash books, invoices, and WhatsApp evidence. The reasoning of the bail court was found to be unsustainable because it treated the absence of proof that the accused was formally a manager of the firms as decisive, even though prosecution under the statutory scheme is not confined to a formal managerial designation and extends to persons who commit or cause the prohibited acts. The order was also found to have overlooked the gravity of the economic offence and the material indicating direct involvement in the alleged fraud.

Conclusion: The bail was rightly cancelled, and the order granting bail was set aside.

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